Global stocks, commodities rise on U.S. fiscal deal

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Traders work on the floor of the New York Stock Exchange, December 14, 2012.
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An employee of a foreign exchange trading company looks at monitors as a television set shows Japan's incoming Prime Minister and the leader of Liberal Democratic Party (LDP) Shinzo Abe speaking in Tokyo December 26, 2012.
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The London Stock Exchange is seen during ther morning rush hour in the City of London April 11, 2011.
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A visitor walks near the logo of the Tokyo Stock Exchange in Tokyo November 5, 2012.
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Workers sweep the floor in front of the final stock price index after the ceremonial closing event of the 2012 stock market during a photo opportunity for the media at the Korea Exchange (KRX) in Seoul December 28, 2012.
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Traders are pictured at their desk in front of the DAX board at the Frankfurt stock exchange December 13, 2012.
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NEW YORK Global stocks jumped 2 percent or more and commodities rallied on Wednesday after U.S. legislators struck a deal to halt a round of automatic fiscal tightening that threatened to push the world's largest economy into recession.

The deal reached on Tuesday to avert the "fiscal cliff" put off the immediate pain of income tax hikes for almost all U.S. households but did nothing to resolve other political impasses on the budget that loom in coming months, including the debt ceiling.

Oil prices pared some gains but Wall Street rallied at the close, with the benchmark S&P 500 posting its best day in more than a year. The CBOE Volatility Index, or VIX .VIX, a gauge of investor anxiety, dropped 18.5 percent to 14.68 at the close. The VIX has fallen 35.4 percent over the past two sessions.

The markets' reaction to the U.S. budget deal was a "sigh of relief that a recession in the world's largest economy has been averted," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York.

Copper rose to its highest in more than two months, while silver and platinum group metals also rose sharply. The S&P 500 achieved its biggest one-day gain since December 20, 2011, pushing the index to its highest close since September 14.

Still, the rally may be short-lived. Spending cuts of $109 billion in military and domestic programs were only delayed for two months, and a fight over the limit for U.S. government debt also looms.

"There was the fiscal cliff euphoria, but the markets are a little overdone and people realize you still have the debt ceiling battle, social security taxes going up and dealing with spending sequestration and budget cuts," said Mark Waggoner, president at Excel Futures Inc.

The deal boosted investors' appetite for riskier assets and depressed the U.S. dollar against major currencies. Brent crude oil hit an 11-week high of nearly $113 per barrel and gold prices rose nearly 1 percent.

Brent February crude rose $1.36 to settle at $112.47 a barrel, after reaching $112.90. U.S. crude for February delivery rose $1.30 to settle at $93.12 a barrel.

The vote in Congress removed a major uncertainty hanging over markets, but some analysts cautioned that the optimism could fade if U.S. economic data later this week, including the December payroll report, disappoints.

U.S. manufacturing expanded slightly in December, bouncing back from an unexpected contraction the prior month, according to an industry report released on Wednesday.

In currency markets, the euro retreated after reaching a two-week high earlier in the session to trade down 0.15 percent at 1.3183. The U.S. dollar rose 0.06 percent against a basket of major currencies .DXY.

Prices of safe-haven government debt fell. Germany's Bund future posted its biggest daily fall since early September, settling down 1.57 points at 144.07.

Yields on U.S. benchmark 10-year Treasury notes hit a more than three-month high, with the price falling 24/32 to yield 1.8406 percent.

Venezuela's U.S. dollar-denominated sovereign bonds rallied across the yield curve on Wednesday in a sign of increased appetite for risk. The benchmark 2027 Global bond gained 1.536 points in price to bid 99.79, yielding 9.273.

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